5 oil producing African countries and their inflation rates

Oil has long been the lifeblood of many African economies, fueling government budgets, powering national development, and filling foreign exchange reserves.

For countries like Nigeria, Angola, and Libya, the vast wealth beneath their soil seems like a golden ticket, one that should provide stability and shield them from economic trouble. But reality tells a different story.

For instance, more than 90% of its foreign exchange earnings flow from crude, and oil revenue fills over half of Nigeria’s national budget. Angola and Libya share a similar story, with their economies deeply entwined with the fate of the oil market.

On paper, this wealth should protect them from inflation, offering a steady stream of income that could ease the need for borrowing and prop up their economies. Yet, the paradox is clear, even with oil riches, these countries struggle with the burden of high inflation rates.

Why? Because oil, as it turns out, is not the unwavering foundation one might think. Its prices are volatile, rising and falling with the shifting tides of global demand.

When prices plummet, so too do the revenues of these oil-producing nations. The domino effect is swift as government spending shrinks, currencies lose value, and inflation sets in.

Nigeria and Angola, both heavily reliant on oil exports, have felt the sting of such price crashes, with their local currencies tumbling and the cost of everyday imports like food and fuel surging beyond the reach of many.

Notably, to soften the blow of high fuel prices on their citizens, many of these nations turn to fuel subsidies. For years, governments have absorbed a portion of the fuel costs, making petrol more affordable for the public. But when the coffers run low, those subsidies become unsustainable.

The painful solution is to cut them, sending fuel prices soaring almost overnight and unleashing inflationary pressure. Nigeria’s recent removal of its long-standing fuel subsidy is a prime example. Practically overnight, fuel prices tripled, pushing inflation even higher in a country already struggling with economic challenges.